At a time when apartments are the favored property type of investors and lenders as occupancies swell and rents rise after the collapse of the housing market, three local apartment owners are finding places to grow — outside Northeast Ohio.
Summit Multicapital LLC in Akron announced Jan. 16 it has acquired the 169-unit Mosteller Mansion Estates in Hickory, N.C., for $18 million. Meantime, an affiliate of Apollo Management in Pepper Pike has bought the 327-unit Georgetown Apartments in Kettering, Ohio, for $12.7 million from Connor Group of Centerville, Ohio, according to the Dayton Business Journal.
Burton Carol Management LLC in Warrensville Heights also added to its portfolio of properties, which are in Northeast Ohio, Michigan and Florida, with the acquisition of Beachwalk Apartments in Novi, Mich., according to Joy Anzalone, chief operating officer.
The 240-unit complex in suburban Detroit was purchased in a distressed sale from Huntington National Bank, Ms. Anzalone said.
The apartment owners are following the tried-and-true investment strategy of tapping different geographies to diversify their holdings.
In Summit Multicapital's case, it is pursuing a plan to acquire properties in areas with population and rent growth, according to Edward Newman, Summit CEO.
“We're buying in areas that are growing because people are attracted by the lifestyle, areas where people want to live, and in secondary markets,” Mr. Newman said.
The Hickory, N.C., property is in the popular Lake Norman area outside of Charlotte, but it's removed from the Charlotte market itself where Summit would need to compete with large, publicly traded real estate investment trusts, Mr. Newman said.
Summit has been buying properties in North Carolina for the last six years, and the Hickory property is near a 312-unit property that it owns in Mooresville, N.C., Mr. Newman said. Summit also owns about 800 units in the suburbs of Denver, and this latest acquisition means about half of its 3,250-suite portfolio is in the Akron area and the rest outside the region.
In Burton Carol's case, it knows the Detroit area from other properties it has owned there in prior firms that it sold. It is a larger metropolitan area than Cleveland, but within a two-hour drive or flight that Burton Carol uses to define its target markets, Ms. Anzalone said.
Although Beachwalk Apartments was bank-owned, Ms. Anzalone described it as a gem because it is located on Walled Lake, an inland lake near Detroit. Burton Carol had to compete with 19 other offers for the property.
“There is exuberance in the market, but you need to be methodical,” Ms. Anzalone said. “We had no problem rising to the price. But you want to buy at a price that will allow you to own a property for years.”
Burton Carol is continuing to look for other opportunities outside the region, she said, but is shying from one of its favorite markets, Florida, because of the rise in selling prices there.
Apollo did not return two calls by Crain's deadline last Friday, Feb. 8, on the Dayton acquisition.
Buying outside the region is a perfect balance to Northeast Ohio's apartment market, which lacks population growth and has rents lower than in larger cities.
That's the view of Michael Barron, a vice president for investments at the Marcus & Millichap real estate brokerage, which has an Independence office.
“In Northeast Ohio you get stability and cash flow,” Mr. Barron said, because units are less costly than in other areas, but the region's slow-grow apartment market frees it from overbuilding typical in areas with population growth.
“In other areas, you get price appreciation for the units and rent growth,” Mr. Barron said.
Ralph McGreevy, executive vice president of the Northeast Ohio Apartment Association trade group, said owners of larger apartment portfolios can compete effectively for properties outside the region because of the market's current strength. He considers the drive to buy outside Northeast Ohio a road well-traveled by property owners in the past. It's now being trod by another group of growing apartment owners, Mr. McGreevy said.